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Converge's revenue surge fails to impress investors on debut week
Ian Nicolas Cigaral (Philstar.com) - October 30, 2020 - 1:42pm

MANILA, Philippines — Revenues of newly-listed Converge ICT Solutions Inc. soared in the third quarter on the back of higher subscriptions, but investors selling on the company's stocks for the past five days seemed unimpressed.

On its first financial report to the local bourse on Friday, the broadband provider disclosed that revenues grew 71% year-on-year to P4.1 million during the July-September period. That performance increased the 9-month tally 67% annually to P10.7 million.

Broken down, household connections propelled growth. Revenues from residential customers surged 90% year-on-year to P8.41 million for the first 9 months. Meanwhile, revenues generated from corporate clients went up a slower 15% to P2.26 million. 

Revenues from home connections were supported by a subscriber base that doubled from year-ago levels to 900,531 as of September. In the third quarter alone, Converge reported adding 208,880 new residential users, 90% of them were first time fixed broadband users.

“Despite the COVID-19 pandemic related headwinds in the Philippines enterprise connectivity market, which according to the market research firm MPA is expected to result in a decline of the market in 2020, the enterprise business of Converge continued to grow steadily,” Converge said in a statement.

But capping its first week at the stock exchange, shares at Converge continued to drop on Friday and close 2.51% down to P14.78 each. Share prices have tumbled 12% from Converge's initial price offer of P16.80.

While Converge’s topline appeared healthy, it was difficult to completely assess the financial status of the company. The firm led by Pampanga-based businessman Dennis H. Uy did not disclose expenses incurred for the year, a critical financial component given Converge’s expansion plans from its current Luzon market.

That said, the company said projects to bring services towards Visayas and Mindanao remained “on track” by the first quarter of 2021. More than 9,000 kilometers of the network’s backbone toward these islands were constructed just over the past quarter.

In Luzon, where operations are currently concentrated, an additional 490,000 FTTH ports were also deployed in September alone to bring the total number to 2.1 million. These fiber cables bring connections to Converge’s clients currently pegged at 5.1 million homes or 21% of households nationwide. 

The company’s “mid-term target” is to reach 55% of total households. 

Converge, however, did report an EBITDA of P5.58 million from January to September, up 74% annually. Converge’s consolidated EBITDA margins improved to 52.2% for the first nine months.

But EBITDA, which literally means earnings before interest, taxes, depreciation and appreciation, does not count related expenses on income tax payments as well as potential depreciation of value of existing assets such as telco towers. “The continued improvement in EBITDA margin was also due to the Company’s early investments in establishing a sustainable and scalable operating cost structure,” Converge said.

CONVERGE ICT SOLUTIONS INC.
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